Nigeria: How Gas Pipeline Will Aid Nigeria's Economic Development

Abuja, Lagos, Yenagoa — The Federal Government, on Tuesday, flagged off the construction phase of the 614km Ajaokuta-Kaduna-Kano (AKK) gas pipeline laying project, which will be concluded in 2023. What is the significant of this multibillion naira project to the country's economy?

President Muhammadu Buhari said the $2.592billion project would bring sustainable development and economic prosperity to the country.

Flagging off the construction work of the project via virtual link from the State House in Abuja, the president said that when completed, it would provide gas for generation of power and feedstock for gas-based industries, as well as facilitate the revival of moribund industries and the establishment of new ones along transit towns in Kogi, Niger and Kaduna states, as well as Abuja, the Federal Capital Territory (FCT).

He noted that harnessing and commercialising the country's vast gas reserves were important for rapid economic development and diversification of the economy. He said this remained a cardinal objective of his administration's drive towards ensuring a stable, sustainable and more prosperous future for the citizenry.

"Today marks an important chapter in the history of our great nation. It marks the day when our domestic natural gas pipeline networks from Obiafu in Rivers State, Escravos in Delta State and Lekki in Lagos State, are being connected through Kaduna to Kano states, thereby further enhancing national energy security," he said.

He said the project would create numerous direct and indirect employment opportunities and impact on the development and utilisation of local skills and manpower, technology transfer and promotion of local manufacturing.

He thanked the government of the Peoples Republic China, the Bank of China and SINOSURE as well as the two engineering procurement construction contractors - Brentex/China Petroleum Pipeline Bureau-CPP Consortium and Oilserve/China First Highway Engineering Company-CFHEC Consortium - for their support and commitment to deliver the project.

The president called on the governors of Kogi, Niger, Kaduna and Kano states and the minister of the FCT to provide the enabling environment and support for the project.

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, said they were working towards supporting President Buhari's economic diversification efforts. According to him, one of such efforts is the expansion of the corporation's domestic gas footprint.

He explained that the engineering procurement construction contract for the 614km AKK gas pipeline project was awarded at a total sum of US$2.592 billion to Messrs Oilserv Plc/China First Highway Engineering Company (Oilserv/CFHEC Consortium) for the first segment covering 303km, and Messrs Brentex Petroleum Services/China Petroleum Pipeline Bureau (Brentex/CPP Consortium) for the second segment covering 311km under a debt-equity financing model with loan from Bank of China and SINOSURE, to be repaid through the pipeline transmission tariff and supported by a sovereign guarantee.

The NNPC GMD informed that all the required conditions for closing the debt financing had been provided and the process of obtaining internal approvals by the lenders is in progress to enable financing close by August 2020.

He disclosed that as part of the agreement, the NNPC is utilising the equity contribution to commence the execution of the project to recover lost time and put the project back on track.

Kyari expressed confidence in the ability of the contractors to deliver the project on time, within budget and to specifications. He noted that upon completion, the project would enable the injection of 2.2bscf/d of gas into the domestic market and facilitate additional power generation capacity of 3,600MW.

In his remark, Governor Yahaya Bello of Kogi State expressed gratitude to God for witnessing the flag-off of the construction phase of the project. He said his administration had sponsored many youths in the state to acquire skills in welding, and urged the contractors to gainfully engage them.

On his part, the governor of Kaduna State, Mallam Nasir el-Rufai, thanked the NNPC, the Ministry of Petroleum Resources and other stakeholders for ensuring the flag-off of the project. He said there was high hope because of the enormous benefits the project would bring to the state.

Daily Trust on Sunday learnt that the project will be in three phases. The first phase is 200 kilometers long and is between Ajaokuta and Abuja, at a projected cost of $855million. The second phase is 193 kilometers long, between Abuja and Kaduna. It is estimated to cost $835m. And the third phase is 221 kilometers long, between Kaduna and Kano, at a projected cost of $1.2bn.

The pipeline project is itself a section of an ambitious pipeline project to supply gas to Europe through the proposed Trans Sahara Gas Pipeline (TSGP) and Nigeria-Morocco Gas Pipelines, according to the NNPC.

The project will significantly curb gas flaring in the Niger Delta and guarantee better air quality in the oil-producing region, it added. Furthermore, the NNPC said the pipeline, which was also conceived to connect demand from the northern part of the country with supply from the South, would be the biggest infrastructure development in the country's recent history. It will also mark a significant shift in the nation's energy policy; from revenue targeted export programmes to development focused domestic supply programmes, according to the country's oil company.

The project will create steady and guaranteed gas supply network between the northern and southern part of Nigeria and enhance power generation capacity, according to Oilserv Limited, one of the contractors handling the project.

The industrial sector will be strengthened, local usage of gas will be promoted and increased, and the country's revenue generation boosted through export of natural gas, Oilserv chairman, Emeka Okwuosa, an engineer, told Daily Trust on Sunday.

He said the project came to life after seven years of processes that morphed from policy conception through implementation strategy designs, master plans and solid implementation programmes.

Perhaps the biggest value to the economy is the participation of indigenous engineering firms, led by Oilserv, in the delivery of some of the phases of the project.

Commenting on the project yesterday, Okwuosa said his company was honoured to be part of the historic project.

He said the project would turn to reality, some of the country's long term economic aspirations of boosting domestic energy infrastructure, deepening the local gas market, creating industrial corridors with cleaner fuel, as well as commercialising the country's abundant gas resources.

He added that the company had successfully delivered over 17 similar challenging projects in the country, including the engineering, procurement and construction of the 67-kilometre Obiafu/Obrikom to Oben (OB3) 48 inch diameter gas transmission pipeline system.

Nigeria, currently ranked the seventh most endowed natural gas country in the world, sits on about 180 trillion cubic feet of gas deposits.

Over the years, Nigeria has exploited its oil resources more, to the detriment of gas, which incidentally fetches more revenue, although more expensive to process.

Speaking on the significance of the project, the acting director-general of the Manufacturers Association of Nigerian (MAN), Ambrose Oruche, said the Ajaokuta-Kaduna gas pipeline project, when completed as scheduled, would revive many moribund industries, particularly in the northern part of the country.

"We have been clamouring for this kind of project in the northern part of Nigeria because many industries along that axis have become moribund; and the national grid is not good enough for their operations," he said.

He, however, noted that if the project is completed as scheduled, most industries that have closed up due to energy issue would come back to life, which he said would in turn create jobs.

"Some states that have not industrialised along the Ajaokuta-Kaduna axis will begin to industrialise," he noted, adding that the project will also be a huge relief to manufacturers, as well as a plus to the industrialisation process of the country.

Similarly, the president and chairman of the National Association of Small and Medium Enterprises (NASME), Prince Orimadegun Agboade said, "From the point of view of the NASME, which I represent, we see it as a very ambitious project and investment, and it will augur well for the unity of this country. Along the value chain, it will create a lot of jobs for our people along that corridor.

It will also stop the gas flaring, which we have been doing all these days. If it stops the flaring of gas, whatever income that will come from there, as against flinging it up, can be re-invested.

Also, our people will not be carrying cylinders along that corridor for their cooking gas and for industrial gas too. I think it would have a very concerted throw back to the life of our MSMEs in that area and to the life of consumers."

However, environmental activists have urged the contractors and government to handle the project with utmost care in order not to damage the environment.

Speaking with Daily Trust on Sunday in Yenagoa, the Bayelsa State capital, the coordinator of Global Care Rescue Mission Comrade, Princess Elizabeth Egbe, also said government should ensure the project does not impact negatively on the lives of the people.

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